This article describes the first reported microwell whole-cell bioconversion using a water immiscible substrate that matches the specific activity and yield achieved in a 1.2 L stirred tank bioreactor. Maximum yields of 0.6 g/Ltotal 1-dodecanol achieved in 24 h compare favorably to 0.28 g/Ltotal 1-dodecanol after 48 h obtained in a stirred tank reactor. Using the microwell platform we present a rapid and systematic approach to identify the key bottlenecks in the bio-oxidation of long-chain alkanes using Escherichia coli expressing the alkane hydroxylase (alkB) complex. The results indicate that mass transfer rates limit productivity in the n-dodecane bio-oxidation system, rather than inherent enzyme activity. Furthermore, substrate solubility, oxygen availability and glucose concentration act cooperatively to affect the amount of by-product, dodecanoic acid. Optimizing these factors using response surface methodology enabled specific yields of 1-dodecanol to increase eightfold and overoxidation to dodecanoic acid to be reduced from 95% to 55%. This resulted in specific activities of 10.4 µmol/min/gdcw on n-dodecane; approximately 50% of the 21 µmol/min/gdcw obtained with n-octane. For the first time, this in vivo rate difference is within the range reported for the purified enzyme. Finally, the results obtained also provide strong evidence that the mechanism of E. coli interaction with alkanes is mainly via uptake of alkanes dissolved in the aqueous phase rather than by direct cell–droplet contact. Biotechnol. Bioeng. 2012;109: 2179–2189. © 2012 Wiley Periodicals, Inc.